Closing Bell - Closing Bell: Cooler inflation fuels sharp rally, Plug Power CEO on stock surge 8/10/22

Episode Date: August 10, 2022

A cooler-than-expected inflation report fueled a sharp rally on Wall Street, with the Dow closing higher by more than 500 points and the Nasdaq surging nearly 3%. Jason Trennert from Strategas and Tony Dwyer from Canaccord discuss what the inflation print means for their outlooks, and how the Fed could react. Meantime shares of Plug Power surged, despite missing earnings estimates. CEO Andy Marsh joins to talk about how his industry could benefit from the Inflation Reduction Act. And one name that sat out the rally was Angi, the parent of Angie’s List. The company’s CEO weighs in on whether or not the pandemic home improvement boom is over.

Here's something we haven't said in a while. A cooler than expected inflation trend is driving a sharp rally today on Wall Street. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market. It's a broad rally. Every sector in the S&P 500 is higher except for utilities, up 1.75% on the S&P.

The Nasdaq zooming up 2.5%. Remember, tech had been under pressure yesterday into the report on fears that we wouldn't see as much of a fall in the inflation rate. The number was good news for the markets. The small caps up 2.7% and the U.S. dollar sharply lower. It's down a full percent off that inflation figure. Bonds are rallying with yields coming down. Here's a live look for you. Show you just how broad it is. The S&P 500 sector heat map. And at the top of the list, you have materials. Some of the cyclically oriented groups up 2.8%. Communication services up a nice 2.4%.

Consumer discretionary also higher, up 2.4%. And what's driving it, a lot of these travel names, the cruise lines that have been beaten up hard. Norwegian Cruises up 11%. Carn Carnival right there up nine and a half. Royal Caribbean will hit some of the travel names later in the show. Also coming up, Canaccord's Tony Dwyer will join us with reaction to the CPI print and whether the data changes his outlook for a market pullback in the fall. Plus, take a look at shares of Plug Power up more than 15 percent, rallying sharply despite missing earnings estimates. We'll talk to the CEO about the numbers and how his business could be impacted by the clean energy provisions in the Inflation Reduction Act.

That is what this rally is all about. Let's get straight, though, to the overall market rally, which is triggered by the inflation report. Mike Santoli is here taking a look at another metric showing how prices are changing. That really goes beneath the headlines. Right. So how broad this easing of inflation was in the July CPI report. It wasn't just one or two factors. Obviously, energy we knew was going to be one. This shows you the net percentage of overall categories within the CPI where prices are going up. So in other words, the percent where prices are up month over month minus those that are going down.

And you see this peak right here. And then the fever broke, right? You came all the way down right toward the long-term average. Naturally, this is jumpy on a month-to-month basis. And it doesn't show you magnitudes. You know the Cleveland Fed mean CPI, which basically just looks at the center of the tendency of the categories. It also was lower than expected today, or at least it showed month-over-month improvement, but it was still high. It's elevated

above 6% annualized. So it's not saying, you know, mission accomplished, it's done, but it does show you that there has been relatively comprehensive easing of inflation pressures. Just want to take a quick snapshot of where this equity market rally has taken the S&P 500. It gets up to 4,200, almost exactly, been hovering at that line for a while. It's now nosed above that early June high that we were kind of watching, and it's been sideways under that for a few days. Early May levels, it's definitely encouraging. It's also broad today, about 85% of the volume of the New York Stock Exchange to the upside. So all to the good. Unclear if this is just kind of a OK, you know, we did it. And now we've we sort of priced in a lot of the observable improvement in terms of the known catalysts out there.

A lot of people talking about the VIX also moving below a key level and what that ticked below 20 today. You know, I don't see that as necessarily in itself some kind of warning sign. That is the lower end of the range. It sometimes does mean the market isn't anticipating, you know, any jolts that might come. But the market itself has not only been strong, but it's also been calmer. If you look at the actual day-to-day volatility, it's not been that remarkable. So to me, we're in summer. It's August.

We got through the jobs number and the CPI. And, you know, people don't want to pay up for 30 days worth of downside protection when the next 30 days we're kind of just talking about late summer range bound trading, perhaps. Mike Santoli. Mike, we'll see you later. Thank you very much. For more, let's bring in Jason Trenert from Strategas. I haven't broken above the morning highs, but it does look like some pretty solid follow through Jason considering the set up here is we're coming off of a rally of

about 14 percent. In the S&P 500 what do you make of it. I listen I think- it's clearly reaction not only to the- to the inflation numbers coming in better but I think more broadly to the fact that the long end of the curve is coming down. I

do think we're in a different regime. I and I, meaning I think this transition from QE to QT is a very meaningful change, probably one of the more meaningful monetary policy changes since the late 70s. So I'm a little skeptical of kind of the everything rally. But, you know, you don't argue with the tape either. This is clearly good news. We think, though, the Fed has a long way to go before it gets inflation to where it really wants to be. So we would still urge some caution here. So the market pricing has shifted around Fed expectations now for September toward 50 basis points.

It was at 75 after the very strong jobs report last week. Do you disagree with that? I wouldn't necessarily disagree with that. I think what, at least prior to today, I think, Sarah, one of the things we saw in the Fed Funds Futures Contract is that people were actually taking the idea of a pivot, we think, a little too far, which is to say that they were pricing in easing on the part of the Fed in the early part of 2023. And to us, that's a really hard argument to make. At least historically, the Fed funds rate has never really stopped going up or the Fed hasn't stopped tightening until the Fed funds rate was above the CPI. And so CPI, in our opinion, is going to come down. That's not surprising,

I don't think, given the fact that the Fed is tightening and given the fact that you're looking at base effects. But again, I think you have a long way to go. And I think, listen, it makes sense the Fed would maybe downshift a bit given some of this better news. But we also try to remind people that this is going to be a process. Unfortunately, I think the Fed has trained everyone to think about economics in V-shaped terms through the use of quantitative easing. And this is going to be more u-shaped you know this is going to be more again a process as opposed to an event in in our opinion so you're not buying you're not it sounds like you're staying pretty defensive or bearish yeah i mean i think sarah we i would say we we are to be you know to be frank i mean bearish is a straight

bearish is a strong word i mean do I really feel like putting on shorts today? Probably not really. By the same token, I don't know if I would really be chasing certainly lower quality companies that are very much dependent upon the kindness of strangers for capital. And that's, again, I think this process where the access to access to capital are you talking about in our opinion is going to change are you talking about bed bath me under amc are you talking about our innovation which is up six percent today where do you where are you going with that yeah no i think that listen i think the access to capital has changed meaningfully from the start of the year i mean at

the start of the year you could have you could have gotten funding for like a ham sandwich. And I think now there's a lot of changes that you're seeing, whether it's the private equity market or the venture market, certainly, I think given what the Fed is doing, I think you have to expect changes just more broadly in the public markets as well, in terms of access to capital.

So I think you still wanna be very careful with those names. And again does that mean you should short them today. I don't know. I'm not that bold or or courageous but I I'm not buying. What about bonds. Because if you think that the that there's too much enthusiasm about the Fed cutting next year. Do you think we that this bond rally reverses and we're going to see higher yields again, especially as we get into QT? I think, yeah. No, I think, listen, as far as QT is concerned, Sarah, as you know, the Fed has only just begun. The Fed's balance sheet, the Fed has actually found it somewhat harder to whittle down the size of their balance sheet than they they thought it might be uh they only started in in june so they've they've got a long way to go and i i think

that puts a little bit of a floor in in yields around here i don't know if i'd really be be an aggressive buyer of bonds or lending the government money at 270 when uh you know inflation is all the way down to eight and a half uh you know it will be lower at the end of the year, I think. But I also think it's a big ask to buy bonds at these levels, given what we think are the underlying inflationary trends. And we think, generally speaking, that inflation is going to be a little bit stickier, perhaps, than the market would suggest today. And finally, Jason, I think you've liked the energy sector, right, in the market would suggest today. And finally, Jason, I think you've liked the

energy sector, right, in the market? I'm asking because crude oil has had a turnaround. It was down a few percentage points earlier today. It's higher now. That's lifted the energy stocks. It's also key for the inflation story. So do you still like this group? We do. We do. And I think, Sarah, here, there's two things going on. One is, you know, we wouldn't doubt that there's a chance for demand destruction, but we also think there are structural changes in the economy that are going to keep supply constrained. The other thing that's happening is that, ironically, I think the ESG movement and the Biden administration, in many ways, is making these companies better investments because they're focused on returning money to shareholders. And so they become the ultimate shorter duration stock to the extent to which they're returning money to shareholders in the form of buybacks and dividends. And in

our opinion, that's a good place to be when inflationary pressures are high. So we still like the energy sector quite a bit. Jason Trenert, thank you very much. It's good to get your take on those numbers from Strategas. We're going to talk more about today's inflation data and the market impact in just a bit when we are joined by Canaccord Chief Market Strategist Tony Dwyer. And up next, trouble on the home front. Take a look at shares of Angie's List. Parent Angie getting slammed today on the back of earnings. We heard that also from IAC this morning, which has a big stake.

We're going to talk to the company CEO, find out whether the COVID home renovation boom is fully over. Dow's up 410 points. You're watching Closing Bell on CNBC. Check out today's stealth mover, the Trade Desk. Look at that move, up 30, more than 30 percent today. It's a $35 billion company that focuses on data-driven advertising. Came out with results topping revenue estimates last night after the bell, with guidance coming in above expectations as well.

The stock has been on a roll lately. It's up about 60% in the past month, though still in the red on the year. It was one of those crazy high flyers during the last wave of the bull market. Shares of home services company Angie taking a dive today. Investors are concerned over slowing revenue growth in July, just up 10 percent compared to the 27 percent growth in June. Joining me here at Post 9 is Angie CEO O'Sheen Hanrahan. It's great to have you and see you in person. So there is some concern about the your quarter was good, but the new numbers you gave around what you're seeing now, why such a slowdown? Great to be here. Thanks for having me.

Yeah, I think the incredibly strong quarter set us up for some serious expectations. And if you think about what we've had this quarter, we've had incredibly strong revenue growth, really strong EBITDA growth back to 10% and then we've had some softness in certain parts of the business. So our ads and leads business very strong back to growth after the rebrand from Angie's List to Angie and we had some operational challenges in our services business which definitely softened things a little bit in July. Is this the roofing issue? That's right we had some softness in roofing, a challenging

business that we bought about just over a year ago. We lapped that and year over year, that business actually shrank. If you net out roofing from services, the services business by itself growing 34% year on year in July. So that delta from 34% down to where we are, really just a function of softness in our roofing business. Nothing serious, just operational challenges. We scored an own goal on ourselves. We'll figure it out over the next couple of quarters and get it back towards the 15 to 20% growth. But what's happening? Because I did hear you on the conference call mention a slowdown in consumer discretionary spending. What are you seeing there? So we're definitely seeing softness in consumer demand. But you got

to remember, the way Angie makes money is pros pay us in our ads and leads business to advertise. So a really long order book where every single pro in America was booked out three to four months. They didn't want to advertise during the pandemic. So we're seeing that business back to growth as we've kind of lapped some of that pandemic. And a more moderate relationship between supply and demand is actually what sets Angie up for success. So we're really happy with the ads and leads business back into the high to mid single digits on growth rate, incredibly strong EBITDA margins in that business. So we're really set up for success with a more moderate relationship. We don't want services demand off the charts. I remember talking to you in the depths of the pandemic when demand was off

the charts for renovations of home, for handyman, for anything that people could do to fix their homes. How closely does that track the housing market now, which is seeing some real weakness? We're definitely seeing weakness in what we would think of as discretionary tasks, particularly discretionary outdoors. So that's things like decking in particular will be a soft task right now. But you've got to remember, 60% of our business is non-discretionary. Your toilet goes out, your electrical system goes out, particularly right now, your HVAC goes out. Those are things that are getting done no matter what. You may shift from replace to repair, which again is potentially good for our business. But that overall demand,

it's definitely down a little, but in tasks where you'd expect it to be down. What about contractors? What do you see when we see turns in the economy, whether we're going into a recession or not, as far as people who want to be working and join your platform? So we look at this thing called active for match, which is when pros are going into the Angie app and they're saying, I'm available right now. So I want a new lead. I want to spend money to advertise on the platform. Year over year, about three months ago, we noticed active for match was tracking up. So that's pros saying, hey, I'm more available than this time last year. You may not feel it when you call a pro right now.

You may still feel they're not available in terms of how they're negotiating, but certainly we look at the data and we see year over year active for match going up, you know, 5, 10% in certain categories, even more. The second thing we look at is their willingness to pay for leads. So their willingness to say, hey, actually I've got 20, 30, 40% capacity across my labor pool. Every marginal lead, every incremental customer is worth so much more when you've got capacity. And we've seen their willingness to pay, to spend on advertising, also go up significantly in the last quarter. What do you say about the stock move, which is down 13%? It's had a rough ride so far this year.

What are investors missing from your perspective? We don't look at the stock day to day, week to week. We're focused on the long term. We've had an incredible quarter. Angie is incredibly well set up for success. And over the long term, we're the only ones in the category that have an ads business, a leads business, and a services business. We've got the leading product in the category. We have more consumer demand than everyone else. Over the long term, stock will realize it. Oshin, thank you very much. It's good to see you.

Thanks so much. That is the CEO of Angie Services. Let's check in on the markets right now. Ahead of the bell, we've got a 444 point rally or so on the S&P 500, on the Dow. The S&P is up almost 2%, 1.8%. The Nasdaq even more, up 2.6%. And look at small caps of 2.8%. The headline inflation numbers showing

price increases are easing. But that is not the case for one very important part of the economy, which you likely know yourself. We'll bring you the big picture on rising food costs at the grocery store next. As we check out, as we head to break, check out today's top search tickers on CNBC.com. Ten-year yield right on top, followed by Tesla after Elon Musk sells more shares. Stock is rebounding up 3.6 percent. Coinbase, which had a rough quarter and has turned around after the inflation report, up 4.6 percent. The S&P and Apple up 2.6 percent. NASDAQ 100 up 2.6 as well.

We'll be right back. In today's big picture, inflation overall may have eased in July. Markets certainly celebrating that. But grocery prices, not so much. In today's CPI report, food prices at home or supermarket prices rose 13 percent from last year, an acceleration from last month and the 14th monthly rise in a row. Some of the components, shocking. Cereal up 16.8 percent, milk up 15.6, coffee prices were up 20 percent. Companies from Campbell's Soup to General Mills have been discussing how they have raised prices multiple times. General Mills raised five times this year. Those stocks are higher today, but underperforming the broader rally.

Mark Sandy, economist at Moody's, does expect food inflation, though, to start coming down soon. Listen. Almost half of the cost of food is diesel, just getting it from the farm to the store shelf. And it takes a little bit of time for that to translate through. So these higher food prices, they should start to come in as well, just as long as oil stays roughly where it is today. Another promising sign. We have seen commodities prices from wheat to corn fall over 25 percent from their highs. Tomorrow's PPI or wholesale price data will give us a clue as to whether it is starting to turn. So far, we're just not seeing it yet. Up next, Canaccord's Tony Dwyer weighs in on today's CPI-driven rally and explains why he thinks the bulls are not out of the woods just yet.

Stocks jumping here on the back of today's inflation numbers, which showed a slowdown in rising prices. Importantly, it was a miss off expectations, which the market likes. But should you trust this rally? Joining us now is Tony Dwyer from Canaccord Genuity. Does it change anything for you, Tony, or are you fading it? Well, you know, Sarah, as you know, we expected the summer rally, and it met all the parameters that we're looking for. Truly, Sarah, the whole reason that you had that first-half tumultuous behavior was on the back of fear of Fed.

And that fear of Fed is about the economic slowdown. So certainly a lower CPI is going to help reinforce the economic slowdown. And therein is where the problem may lie later in the year when that becomes a reality. So you think this is just, what, the final innings of the summer rally? Yeah, I do. Well well forget about my opinion you know i'm about the data the data that we have remember the indicator we used which was a 10 week rate of change just a very simple indicator on the s p and when you've had it drop by minus 15 so i call it a whoosh you know a technical term where you get an extreme selling it's only

happened 16 times since 1957 and And when it's happening and it's pivoted higher, the only time that you didn't have some kind of test of the lower, some kind of pullback, literally after a median 15, 14.96% gain is when the Fed has already started easing. So obviously that's not the case. And just like it felt so wrong to look for a summer rally six weeks ago, it feels so wrong not to be chasing the upside with a lower CPI print. And I think that's really, I want to be careful to not, you know, sell into extreme whooshes and buy into extreme ramps. Well, and there's also, you know, this old saying, don't fight the Fed.

I feel like that is what the market is increasingly doing here, even with the inflation report today showing some easing. We've had two Fed presidents out. We've got Kashkari of the Minneapolis Fed, who's gone from Uber Dove to Uber Hawk now, saying we're far, far, far away from declaring victory on inflation and that he expects 3.9 percent for the terminal rate this year, 4.4 next year, which is one of the most hawkish. I think it is the most hawkish expectation that the consensus of the Fed is closer to around three and a half percent. Evans of Chicago says inflation is unacceptably high. Yeah, unacceptably high. So is the market ignoring this at their peril?

Well, I don't know if it's ignoring it at its peril, but it's ignoring what the Fed is telling them, which it's interesting. Today, for example, the 2, 5, 10-year paper was down double digit, 10, 11, 12 basis points, even up to 18 basis points. And that's all reversed higher the last I looked so that it's just down a little bit on the day. And I think it was the positioning. Sarah, remember the summer rally conditions were you had an extreme oversold condition, like a historic oversold condition. You had excessive fear of the Fed. That's obviously no longer there any more than the oversold condition is, as you point out.

And then lastly, and this is the most important, there was an excessive fear of economic activity. Nominal growth in GDP was 7% in the last reading. So I get it. The academic study says two quarters in a row of negative GDP is a weak economy. It was simply too soon to expect the higher rates to negatively impact economic output. That's saved for really at the end of the year and into next year. So the first fear of a market decline is fear of what the Fed's going to do like fear of Fed then you get the comfort that okay maybe that maybe it's not so bad the pendulum swung too excessive now down to the to the sweet

spot to expect it to stay here without any economic issues on the back of this kind of Fed policy is to expect that pendulum to stay there and not swing this way from here on in it's about economic weakness, not higher inflation once we're done with the summer rally, which obviously is continuing on a little bit today. Except then we get some really good data points that show that unemployment is coming down and that employment is actually accelerating with that jobs report showing more than 500,000 jobs. And I get it could be a lagging indicator, but it's showing an acceleration, which does make you wonder if there's a bigger cushion there for what we're feeling on the rate hikes.

Well, the Fed's really in a box. I mean, Sarah, so, you know, classic strategist. It takes anywhere between three months to 18 months for an interest rate increase to impact economic output. That's like the greatest hedge of all time. So let's just call it three months and play the most conservative. That means that we're just beginning to discount the initial rate hikes. One of the economic slowing that has taken place to date is about the fiscal cliff, where you cut off the unemployment benefits and the pandemic-related stimulus.

And now we're transitioning into that sweet spot where you go from good news is bad news. Now, bad news is good news. At some point, unless you avoid recession, you're going to have bad news is bad news. Now, that doesn't mean you're down 50 percent. That just means you could pull back and test the low, which has happened every time when that tactical indicator I talked to you about earlier goes off. Not buying it. Tony Dwyer, thank you very much for your thoughts from Canagore. Have a great day. Thanks, Sarah. You too.

Here's where we stand in the market. We are up sharply, 464 points on the Dow, up almost 2%. We've actually gained a little traction here in this final hour of trade with the S&P up almost 2%. Goldman Sachs is the biggest winner right now on the Dow, and every sector is higher currently in the S&P. The Nasdaq up 2.7%. A lot of the tech names are working today, and it's really everything from the unprofitable names

to the large-cap players like an Amazon or an Apple, Meta, Google, all working. Up next, shares of Plug Power are surging today. Even after earnings and revenue missed the mark, we'll talk to the CEO about Wall Street's reaction, plus the impact he is expecting from the Inflation Reduction Act, which is the key. And you can listen. A reminder to closing bell on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. Take a look at plug power shares

surging today up more than 17 percent. The company missed estimates in its Q2 report last night, but analysts say the Inflation Reduction Act will accelerate growth of the green hydrogen industry and boost Plug's product lines. And the company talked about it on the call. Joining us is Plug Power CEO Andy Marsh. Andy, it's great to have you. What a day for you. You know, one analyst characterized your comments on the Inflation Reduction Act as giddy. So what is the impact here for your business? Well, Sarah, we were on a good track before the Inflation Reduction Act. It's really just an accelerator. I mean, we are on track with achieving $900 to $925 million in revenue this year.

We are on track to grow this business to $3 billion in revenue by 2025 and 17% OI. But this act just accelerates it faster, especially our electrolyzer business. So we are bullish. We are excited. Giddy's an interesting word. But, you know, it is, we are, we were heading in the right direction. This just helps us even more. From a demand perspective or credits make it more cost effective for you to produce hydrogen? I think Sarah on both. There will be, you know, in our electrolyzer business, for example, where, you know, green hydrogen will

replace gray hydrogen, which is used in things like fertilizer manufacturing. It'll allow us to provide substitutes for natural gas in many applications, such as the manufacturing of green steel. So it creates demand for us in our electrolyzer business, where green is now more cost competitive than gray. On top of that, for our hydrogen generation business, where we're building the largest network across the United States, that will help us on the cost front. So we win on both sides. So what happens to your margins? Because they have been under pressure, Andy, on some of the near-term supply issues, supply constraints and also higher prices of nat gas. So how does that balance with the help you're going to get on the credits on the cost

side? Yeah. So Sarah, the two big items on the cost side is this company's become vertically integrated. We're building out green hydrogen plants, which takes our negative margin in purchasing hydrogen from others to over 30% gross margins. So it is, you know, that in itself helps drive this company to profitability. And on our service line, we're seeing dramatic improvements. We'll be gross margin break-even with service by year-end. So the numbers add up that we will achieve profitability in 2024,

as our CFO said yesterday on the call. And in 2025, we'll be at 17% OI. What does adoption look like right now? It still feels like somewhat of a niche product. Where are we in that journey? And when do you think we could get to mass market, if ever? So, Sarah, probably during COVID, you ate food that was moved on forklift trucks because we helped move 25% of the food in the US during the COVID crisis. There are over 60,000 fuel cells out there

and it's only just beginning. There are over 185 fueling stations that Plug has built for customers like Amazon and Walmart. It's certainly just the beginning, but the adoption rate's happening quicker than you may think. And I think another indicator is our green hydrogen generation products, our electrolyzers, we've booked over 1.5 gigawatts in the last seven months. And last year, it was probably less than

50 to 100 megawatts. Andy, we'll keep an eye on it. Thank you for joining us. Thank you for having me, Sarah. Bye now. Bye. Andy Marsh, CEO of Plug Power. Up next, analyst Mark Mahaney joins us with the latest on the Twitter saga as Elon Musk unloads billions of dollars in Tesla stock to fund a potential deal. That story plus a preview of what to watch when Disney reports today after the bell when we take you after the bell when we take you inside the market zone. We are now in the closing bell market zone. Lindsay Bell from Ally Invest is here to break down these crucial moments of the trading day. Plus, we've got Philip Oh on the rally for travel stocks and Mark Mahaney on the latest Musk Twitter drama.

We'll kick it off with the broad market. Dow's up 530 points. We've surged Oh on the rally for travel stocks and Mark Mahaney on the latest Musk Twitter drama. We'll kick it off with the broad market. Dow's up 530 points. We've surged just in the last few moments up to the highs. The S&P up 2.1 percent. It's a healthy rally. All sectors are higher on the day. Bonds are rallying. The dollar selling off in Bitcoin and crypto is also getting a big boost.

Lindsay, we've had two strategists on the show today. We had Jason Trennert of Strategas. We had Tony Dwyer of Canacard, both pretty skeptical on the rally. One worried about the economy and the fallout from higher rates. And Jason's worried about the Fed having to do even more and saying the market is too excited over rate cuts. Where do you stand? Yeah, I mean, look, I think this potentially could be an overreaction to what was a pretty good CPI report. We definitely have a lot of data to get through before we get to the actual decision by the Fed in September.

But for today, we're rallying. And I think it's really because inflation has been such an overhang for investors and for the market. And I think what investors are thinking today is maybe the peak really has been put in the past. If you look at core CPI, while it stayed hot at 5.9 percent, stayed steady, it has come down from about 6.5 percent in March of this year. So we might have peak inflation in. But the question is, where does inflation go from here? How fast does it move lower from here? We're not probably going to end the year at 2 percent inflation. So I can understand the worries of both of those strategists that you just mentioned. Let's hit Twitter and Tesla, which are both moving higher today. This after Elon Musk

sold almost $7 billion worth of Tesla shares. Musk saying in a tweet the funds could be used to finance a potential Twitter deal if he loses his legal battle with the company. Musk now has sold about $2 billion in Tesla stock since November. Joining us for more is Mark Mahaney, Evercore ISI head of internet research. Does this make you think that he's closer to having to buy this company? I think it's hard not to reach that conclusion. I'm no legal expert, but with all the checks we've done on it, it would seem to appear that Twitter is a pretty strong legal position here. This is all going to come to a head in the middle of October. I think the date's October 19th. You've got a judge, Chancellor McCormick, who has a pretty clear track record on this, seems to be a no BS judge. And the five day hearings are going to determine this

case and specific performance seems like a reasonable, you know, odds on outcome. But we'll see. And I think that's exactly how the market's interpreting it today. That just became more probable. Maybe they'll still negotiate something between now and then. But it's it does seem more likely that this deal is going to happen. Well, the stock is still $10 below the deal price. So why aren't you recommending it if you think the deal is going to happen? Because this is a deal situation. And these are so hard to predict. And so we're out of fundamentals land, and I try to keep myself to fundamentals land.

So I also want to be careful on the downside here, too. I mean, we didn't think he was going to walk away from the deal in the first place. And those who were short to stock could have made a lot of money as part of that if they covered at this point. I want to think about the downside, though. In that situation, we never know what's going to happen if this if the deal were to fall apart. Where does Twitter go? That's what the market's done is kind of put the stock kind of in the middle of the upside and the downside case. The upside is 54 bucks.

The downside, if you look at comps like pins and and Snap, you could probably see yourself to a $30 stock. So, you know, you're a little bit above, you know, making money. There's a little less downside here on the upside case than there is on the downside case. So that tells you the market's thinking this is going to happen, but it's not a distinct possibility. And this has been more volatile of the deal than any I've seen. So I want to be careful. So which which stocks then do you prefer the fundamentals of? Because now we've seen a pretty nice rally. I'll give you a little grief for saying into earnings that you didn't like any of the big cap tech. At least you thought that the earnings were going to come down and that expectations were still a little too high.

They did pretty well. And even Meta, which was the one disappointment, has had a pretty nice rally here, up 12% so far in August. Well, you know, what we've also had is we've had cases where numbers have gone up and stocks have gone up. We've had cases where numbers have gone down and stocks have gone up. So this is a very different environment. This changed just in the last two months. First half of the year, we had dramatic multiple corrections.

So we assumed, we thought that the multiple risk had been taking out a lot of consumer tech stocks. The question was the estimates risk. And we've generally had estimates come down. What I do like, I'll still stick with the names that we like, Amazon, Booking, and Meta. And I think Amazon just kind of got unlocked this last quarter. I think it's still got a lot of room to go. Meta hasn't been unlocked. There's still a lot of distrust about that, fear about that, that stock skepticism for good reasons, too. I understand that. But I think you can if you get unlocked like you just had on Amazon, tons of upside. I like Meta here. If we've peaked on inflation, Mark, does that change the story for any of your names,

which have been hit so hard on fears of higher rates and the economic fallout? Absolutely. Look, I've been waiting for two things to get, you know, really bullish back in growth equities. And, you know, you need this inflation moderation, which leads to interest rate moderation. So that's one thing. And then you need the cuts to estimates. Look, estimates have come down across consumer tech because of recessionary fears and also because of rising costs. But the costs were part of the H1 story of this year. The back half of the story is the demand cuts. But those have happened.

So, you know, the path has been set here as long as you don't have another kind of big negative leg down. So, look, I like this base. I don't know whether the bottom is here or whether we're still three months out or six months out. But, you know, you're going to make money if you're if you're not you. The odds are in your favor if you can at least look out a year or longer. I really like the setup, particularly on the highest quality consumer tech stocks. Mark Mahaney, good to hear from you. Thank you very much. Check out the move in airline stocks up across the board. American CEO Bob Eisen announcing today American received the first Boeing 787 in over two years,

and it does expect to get eight more before the year is over. The cruise lines also moving sharply higher. Some of the top performers right now in the S&P 500. Of course, they've been on the other side of that trade as recently as yesterday. Look at Norwegian. It's up more than 12 percent. Phil LeBeau joins us now. Phil, on the airlines specifically, what do you hear? Well, look, you have a situation for the airlines where travel remains extremely strong. Jet fuel prices are coming down. And the airline stocks, they all got dinged. All of these companies,

all of the stocks got dinged after they report their Q2 results. But since that came out, mid to late July, you started to see the airline stocks recover. And that's what we've seen pretty much across the board, whether it's the largest of the carriers or even those who are a little bit smaller. They're all up between 2% and 4% today. And with regard, you mentioned the 787 Dreamliner. Take a look at shares of Boeing, GE, Spirit Aerosystems, Honeywell. You start to see more deliveries coming in the next year. And that's why these stocks are moving higher. The Dreamliner. Yes, we knew that these deliveries were going to resume. That did happen today with American receiving a 787.

Now you're going to start to see more focus on what happens with the Boeing deliveries. Second half of this year heading into next year. Lindsay, I get also the weaker dollar. Maybe that's leading some to speculate that we'll get more international travelers here. The hotels are up. The cruises are up. And Phil mentioned the airlines. What what do you make of some of these these travel groups, which have typically been pretty cyclical, but catching a nice a nice wave here of unprecedented travel demand. Yeah, you know, I think it really does line the demand from the consumer. And like you said, perhaps international travel is coming back. We're seeing business travel come back. And don't

forget these airlines, they actually had to limit the amount of flights that were available over the course of the summer because they didn't have enough staff or enough airplanes. If we can get out of that, if they can get that out of their way and they're receiving delivery of some airplanes, that means they're going to be able to put more supply in the market to really benefit that demand. And we also saw prices come down in the CPI report today for airfares. So that also helps consumer demand. So I think today is just an upbeat day for the airlines in general. I think they're going to continue to be more volatile as we move forward until we get a clearer picture into the end of the year

and if holiday travel is going to be as strong as some people expect. A lot of cyclical groups are moving up today. Home buildings, semiconductors, autos all at the top of the market. Phil Abou, Phil, thank you. Disney is the name we'll be watching after the bell as the company gears up for third quarter results. It's up today, but among the worst performers in the Dow this year. Julia Boorstin here with the preview. Julia. Sarah, Disney is expected to grow revenue 23 percent and earnings per share to grow by 21 percent, bolstered by a rebound at its

parks division. But investors will be very much focused on its streaming subscriber numbers, expecting Disney Plus to add 10 million subscribers in the quarter. They're also waiting to see if the company will reaffirm its target of hitting between 230 million and 260 million streaming subscribers by 2024. And also the fact that the company said that it hopes for the streamer to be breakeven at that point. We'll see if they re company said that it hopes for the streamer to be break-even at that point. We'll see if they reaffirm that. The other question is how inflation could hurt parks bookings and consumer spending. The parks are expected to be the big growth driver for this quarter. Guys? Yeah, and potential recession, if that's what the worry is in the market. Julia,

thank you. Julia Boorstin. Lindsay, Disney, it's been such an underperformer. Also, you know, referendum on Bob Chapek, the CEO, who's been under pressure with public relations issues, the stock price, and then missing some streaming numbers. Yeah, I know there's a lot to think about going into this report, but I think the travel and tourism boost is really helping their parks business. And I think people are excited about that. But the question is, how does that look going forward?

And how does the streaming business look forward? If you look at the stock, while it's been beaten down, it's down about 40% from its 52-week high. It actually has moved up about 20% going into this report from mid-July. So it's had a good move over the last couple weeks so that makes a little more difficult for investors to react positively at this point in time I think but and at the same time also you've seen the multiple expand to about 24 times after a bottomed at 19 and a half times so it's got to be a really good report here that streaming number is going to be important what the parks do and the outlook there is going to be important and also even with with ad spend, what we've heard from other companies, how is

that impacting this business? So there's a lot on the table for Disney and it's coming after a nice move higher, at least in the near term for the stock. Yeah. And the last month up 17 percent, still down almost 30 for the for the year. Lindsay, so now that we're we're through the bulk of earnings season and you look at the guidance we got and some of the estimates for next quarter Q3, which sectors look ripe? Which ones do you think expectations are off with what you're expecting? You know, I mean, it's easy to say today, especially, but I've been saying this for a little while, is I think consumer discretionary is a sector that there might be some opportunity in.

Estimates have come down quite significantly. Also, you're starting to see as gas prices come down, they're down about 20 percent. Consumer price index inflation, that's come off a little bit. That is a huge benefit to the consumer. Also, you're starting to see a bit of stabilization in interest rates potentially here, at least from a market perspective. And that could benefit some of the consumer services companies. They're benefiting from a shift in spending entirely by the consumer

as they focus more on experiences and travel rather than on goods. But good prices are coming down, too. So it's going to be a rough couple weeks, I think, here for the retailers. It's going to be a one-by-one basis when you think about the retailers. But I think there could be some opportunity. So I'm going to be watching those earnings really closely this quarter. And I think as we get into the second half of the year, you could see some relief in the consumer discretionary sector overall.

Well, yeah, we're going to get the biggies, Walmart and Target, soon in the next few weeks. I wonder, Lindsay, is all the bad news in there or do you expect more to come? You know, I think there's a lot of bad news in there. And I think these earnings announcements are the time to get all the rest of the bad news out if there is more because the stocks, Wall Street's giving all companies a pass on being more conservative and cutting guidance. So now's the time to do it. And I think if they do it, we get past this quarter. There is something to look forward into the latter part of the year, especially if inflation comes down and gas prices remain lower. And like I said, interest rates remain stabilized. Lindsay Bell, it's good to have you here for the Market Zone.

Thank you from Ally Invest. As we head into the close, I want to show you what's happening in the market. It's a broad-based rally, and it's near the highs of the day. The Dow is surging. Nearly every Dow stock is higher. We're up 500 points on the Dow. What's having the most impact here positively? It's Salesforce. And actually, Salesforce is number three. It's Coleman Sach most impact here positively? It's Salesforce. And actually,

Salesforce is number three. It's Coleman Sachs, Microsoft, and then Salesforce. But most of the Dow stocks higher except for UNH, UnitedHealth, and Merck. S&P 500 rallying into the close. We're up a solid 2%. It's materials driving us higher the most, but also some solid strength in consumer discretionary communication services, technology. Financials are joining the party. Cyclical groups like industrials are in there as well. Energy also turning positive a little bit later in the day as crude oil flipped and gained on the session. The Nasdaq is the big winner, though, of course, with the tech stocks flying here. The Nasdaq 100 up sharply. You've got Apple, Microsoft, Amazon, Tesla, NVIDIA, Meta, Alphabet all contributing

the most, the big ones, but also some of the smaller technology companies that have been hardest hit in the downturn, the bear market of this year. ARK Innovation ETF is going out with a gain of 7.2 percent. The everything rally, as Jason Trenner called it. That's it for me on Closing Bell. I'll see you tomorrow, everyone. Now into overtime with Mike Santoli.